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Stripping Away The Disguise of Derivatives

The Financial Times has issued a report on Greece’s use of derivatives to mask its true debt spending.

For those who don’t know, the FT is a total fascist mouthpiece with a globalist agenda. The editors are a bunch of treasonous villains on the order of Kissinger’s CFR, so I’m not sure why the FT has issued such a report. I have to assume they have an agenda or they are covering their ass.

Reaction to revelations that Greece used derivatives to disguise its true level of borrowing is reminiscent of Captain Renault (played by Claude Rains) in Casablanca: “I am shocked, shocked to find that gambling is going on in here.”

Use of derivatives to disguise debt and arbitrage regulations and accounting rules is not new. In the 1990s Japanese companies and investors pioneered the use of derivatives to hide losses – a practice called “tobashi” – “to make fly away”.

The FT goes on to describe how derivatives contracts can be used to mask actual debt obligations:

Derivatives, such as interest rate and currency swaps, are used to alter the interest rates and currency of the cash flows on existing assets or liabilities. Transactions entail exchanges of one stream of payments for another. At the commencement of the transaction, if the contract is priced at current market rates, then the current (present) value of the two sets of cash flows should be equal (ignoring any profit). The contract has “zero” value – in effect, no payment is required between the parties.

Using artificial “off-market” interest or currency rates, it is possible to create differences in value between payments and receipts. If the value of future payments is higher than future receipts, then one party receives an upfront payment reflecting the now positive value of the contract. In effect, the participant receives a payment today that is repaid by the higher-than-market payments in the future. Any number of strategies involving combinations of different derivatives can achieve this effect.

And then tells us how the Greeks were using them:

The Greek transactions are believed to be similar [to Italy’s scam] cross-currency swaps linked to the country’s foreign currency debt, structured with off-market rates. Analysts suggest that the cash received from the transactions may have reduced Greece’s debt/GDP ratio from 107 per cent in 2001 to 104.9 per cent in 2002 and lowered interest payments from 7.4 per cent in 2001 to 6.4 per cent in 2002.

The reduction in interest is huge, as that lowers the installment payment burden the government has to make.

We have similar revolving debt nonsense going on here at home as well which is achieving the same effect, but since our criminal government hides behind a veil of secrecy, we don’t know the full extent of what’s goin bailing out the Greeks.

As the Business Insider article by Ron Paul notes:

Because of our globe-straddling empire and lingering reserve currency status, perhaps no one has a more vested interest in keeping this system cobbled together than our own government and the Federal Reserve. The agreements that Iceland and Dubai and Greece have negotiated can amount to little more than kicking the can down the road, as their overall spending habits remain largely intact, fiat currencies are still legal tender and more debt is issued on top of unsustainable debt. The American people have the right to know if they are going to be the ones holding the bag in the end because the Federal Reserve secretly put them on the hook for it. This knowledge would be a key factor in peacefully dismantling this immoral and unconstitutional system.

With the FT publishing that Greece was heavily involved in using derivatives to mask its debt obligations, and the fact that the Fed may be involved, one has to wonder just what our own criminal government is up to.